“We will safeguard Britain’s credit rating with a credible plan to eliminate the bulk of the structural deficit over a Parliament…”
– The Conservative Party Manifesto 2010.
This evening – a day after it was noted that Osborne will embarrassingly reveal that borrowing this year will go up – Moody’s Ratings Agency has downgraded the UK’s credit rating from AAA to AA1. Moody’s stated the reason for the downgrade was:
The key interrelated drivers of today’s action are:
1. The continuing weakness in the UK’s medium-term growth outlook, with a period of sluggish growth which Moody’s now expects will extend into the second half of the decade;
2. The challenges that subdued medium-term growth prospects pose to the government’s fiscal consolidation programme, which will now extend well into the next parliament;
3. And, as a consequence of the UK’s high and rising debt burden, a deterioration in the shock-absorption capacity of the government’s balance sheet, which is unlikely to reverse before 2016.
The problem Moody’s sees, is lack of growth. The government have relied too heavily on austerity, and not on growth in any meaningful way. And austerity, without growth, is a failure. Austerity may work at times of prosperity, but when wages are worthless, when growth is stagnant or receding, it simply fails. It has failed again. Therefore, the Chancellor has failed. Moody’s continues:
When Moody’s changed the outlook on the UK’s rating to negative in February 2012, the rating agency cited concerns over the increased uncertainty regarding the pace of fiscal consolidation due to materially weaker growth prospects, which contributed to higher than previously expected projections for the deficit, and consequently also an expected rise in the debt burden.
– Here, they are clear. Moody’s is concerned that continued austerity, despite “weaker” (a euphemism, for no growth, stagnation, and recession) growth than ‘expected’, has led to rising debts. It failed miserably. The statement from Moody’s is one long winded way of saying, the Tory plan A failed. It will continue to fail.
So what was the Chancellor’s response to the news that his plan has failed? Well, he seems to be under the impression that the downgrade simply means he’s doing a wonderful job, his plan is working, and will continue without any changes to it whatsoever:
Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it.
We will go on delivering the plan that has cut the deficit by a quarter, and given us record low interest rates and record numbers of jobs.
– Let’s be clear, ‘record number of jobs’ simply means, people working, regardless of whether they are paid or not. Unpaid work, to me, is not “employment”. Nor is anyone “employing” you if your jobseekers allowance is only being paid under the condition that you stack shelves for multinational companies using free labour. There are still 2,500,000 unemployed, chasing 500,000 jobs. That’s not a record number. Of the 500,000 jobs the Government claimed to have created, 1 in 5 of those are on unpaid work schemes, and most still claim jobseekers allowance. You know, the people forced to work for multinational Companies, who apparently do not have to rent their labour (this is reprehensible Capitalism, but not unexpected from the Tory Party), because the government claims to be paying their wage, through unemployment benefit. People on ‘job hunt workshops’ receiving no pay or training are also counted. So let’s be clear; the Chancellor just invents whatever he feels comfortable with at the time, to make himself sound impressive. The problem is, sometimes those invented comforts come back to bite you.
The Chancellor is missing the point and completely ignoring what Moody’s actually said. They do not believe that austerity, at a time when growth is slow or regressing has worked. In fact, it has made matters work. That has been the legacy of the past three years of Tory government. Osborne insisting he will continue on this path, suggests he thinks his policy has worked; that a downgrade simply confirms his plan is the right one. So let’s take a look at his thoughts on the Credit Rating over the past few years:
George Osborne’s Words of Wisdom
When Standard and Poor’s first put the UK on a watch list for our Credit Rating, the then Opposition Chancellor George Osborne made his feelings known about what should happen, even for being on the list, to the Labour Government:
“It’s now clear that Britain’s economic reputation is on the line at the next general election, another reason for bringing the date forward and having that election now… For the first time since these ratings began in 1978, the outlook for British debt has been downgraded from stable to negative.”
– Please note, that before today’s Downgrade, Moody’s put the UK back on negative outlook in February 2012. On Osborne’s watch.
Also when in opposition, the Chancellor told us just what losing the AAA Credit Rating would mean for the entire nation, and particularly the Government:
“….now Britain faces the humiliating possibility of losing its international credit rating.”
Also pre-election, Osborne lets us know that investment into the UK would be very difficult if the Credit Rating was downgraded:
“What investor is going to come to the UK when they fear a downgrade of our credit-rating and a collapse of confidence?”
It seems in opposition, the Chancellor could not keep quiet about just how important it was to keep our AAA Credit Rating, at the risk of the destruction of the entire Nation! And how only he could stop the doom!
one of the things I’m very keen on doing, and that’s putting it mildly, is to preserve Britain’s international credit rating. You know it’s absolutely essential we don’t have the downgrade that hangs over the country at the moment.”
In 2011, the Chancellor was keen to tell us how great his policies are, and how safe they have made us! HURRAH!
“Our credit rating had been put on negative watch. Now, however, thanks to the policies of this coalition Government, Britain has economic stability again.”
– That was mid-2011. By early 2012, we were back on negative watch again. Thanks Coalition!
in 2010, he gave us a benchmark by which to judge him as a Chancellor. He also gave us strong assurances of what the Coalition “WILL” do.
“Our first benchmark is to cut the deficit more quickly to safeguard Britain’s credit rating. I know that we are taking a political gamble to set this up as a measure of success. Protecting the credit rating will not be easy… The pace of fiscal consolidation will be co-ordinated with monetary policy. And we WILL protect Britain’s credit rating and international reputation.”
July 2012, Osborne tells us just how important retaining the AAA Credit Rating is:
“A reminder that despite the economic problems we face, the world has confidence that we are dealing with them”.
Moody’s is of course, untrustworthy and rather awful at what they do, given that a couple of weeks before its predictable death, AIG was rated AAA by Moody’s. That however, misses the point. George Osborne is the man who held the judgements of Credit Ratings Agencies up to be important references on how well a Government is performing economically, using them to continuously attack the Labour Government. He must face his own words. His own words, that simply add to his loss of all credibility this evening.
We must add ‘Downgraded Credit Rating’ to the list of Osborne’s failures as Chancellor. And the list is pretty long for a Chancellor who hasn’t yet been in the job for three years. The failure stems from the fallacy, that by cutting the public sector, the private sector would sweep up all those lost jobs. By taking money away from the poorest, and giving tax breaks to the wealthiest, we’d see new businesses everywhere, and job creation in abundance! Of course, none of that actually happened, or anything like it. Instead we have recessions, falling wages, people kicked out of their homes for having a spare room, banks not lending, the unemployed in payless jobs for multinationals, rising child poverty, borrowing and the deficit rising, and now a downgraded Credit Rating.
The Chancellor has to be sacked. His list of failings is immense. By contrast, Andrew Lansley was sacked as Health Minister, simply for not ‘explaining’ the NHS reforms adequately enough. The problem the Prime Minister has with Osborne, is that sacking the Chancellor, is an admission that the economic plan set forth from the moment they were elected, has failed.
If the Tories and Lib Dems thought they had inherited a mess in 2010, it is going to be a hell of a lot worse for those elected in 2015.
– So, given that over the past four years he has insisted that our Country is doomed if we lose Triple A, that it’s a complete embarrassment, that the Government of the time should call an election due to the economic failure they preside over simply for being ‘watched’ and not downgraded, that his policies saved the credit rating, and then as that rating is downgraded today, insists its just proof that his plan has worked……. how on earth is this man still the Chancellor of the Exchequer? Surely by his own standards, he has failed miserably?